Elsewhere

During the European session there were two auctions, one from Austria which saw 2 auctions (2016 and a 2022), the results weren't all that interesting, there was an increase in the short term debt yields from the last auction (2.21% vs 1.96%), the longer dated debt fell slightly in yield, no big news there.

Holland sold $3.10 bn in 2015 .75% bonds at a yield of .853% and missed their total allocation of $3.5 bn in bonds offered.

Italian 10 year BTPs are near unchanged in the red zone at a yield of 7.15%.

Again, the ECB's deposit facility hit all time new highs with another $20 billion euros being deposited overnight for an all time new high of $482 billion, which is an increase of $217 billion since the ECB's December 21st LTRO (Long Term Repo Operation) which netted out loans of $210 billion, meaning that since the LTRO was conducted, all of the LTRO cash has now been redeposited with the ECB plus another $7 billion. While the market has opened in a risk on mode, the banks are certainly anything but. As I have pointed out, LTRO cash deposited with the ECB for safe keeping (rather then having it exposed in the financial markets) is costing banks money (a negative yield of  -.25%).

Hungary is quickly becoming the focal point of concern in Europe after IMF talks broke down as Hungary refused to change its Central Bank policies to fall more in line (literally) with EU demands. The fear is if Hungary defaults, which is already rated Junk status and recently saw their currency the forint hit all time new lows, Austria which has huge exposure to the Hungarian housing market will be next. After seeing a downgrade, debt yields rocketing, widening CDS to new record highs and the currency hit new lows, they have caved in to IMF demands regarding their central bank. Hungary's foreign minister said today, "We stand ready to consider changing legislation, if necessary." It seems talks will restart, what the outcome will be is anyone's guess, but Hungary, a country that has spent most of its history under some form of occupation from the Ottoman Turks, to Germans to the Soviets,  quickly learned that standing up for their sovereignty is no longer in fashion in Europe.


In the early hours of the morning today, Fitch said they did not expect France to be downgraded in 2012 and they further reaffirmed Germany's AAa status, however they did say they see Italy as the biggest threat to the Euro-Zone according to the WSJ. Fitch also said they expect an Italian downgrade this month.

Apparently yesterday's Mer-Kozy conference was quite preoccupied with the Greek situation, saying if there is not a resolution to the Greek bond holder debt restructuring/haircuts, that the EU/IMF tranche will not be paid out, which could see Greece default as soon as March, the one thing they have managed not to do up to this point.


In other news, some of the biggest US banks (after a late 2011 mass firing on Wall Street) are contemplating freezing salaries of all junior bankers. US banks have seen a significant drop in investment banking revenues.

Out of Iran, it was reported yesterday by the IAEA that Iran is enriching Uranium to 20% at their Fordo site, weapons grade, but the IAEA added that the facility is under the watch of the IAEA and should pose no threat. This of course has been met with skepticism. Today it has been reported that they are preparing a test of a 1 kilo-ton nuclear device at an underground test site sometime during 2012. So much for academic debates about Iran's intensions regarding its nuclear program.